3/02/2007 @ 9:00AM

Wall Street's Magic Number

Many people dream about winning a $100 million lottery, figuring the $60 million or so they’d rake in after taxes would set them up for life, and they could quit their jobs and retire in luxury.

But some (OK, not very many, but some) people wouldn’t consider $60 million enough. Like someone who works on Wall Street. Last year, more than $36 billion in bonuses were handed out to everyone from investment bankers and traders to executive assistants (it was not evenly distributed). Of that, $16 billion was handed out at just one firm,
Goldman Sachs
.

Did everyone quit Goldman and retire? No.

Wall Street is competitive for sure, filled with many of the most brilliant mathematical minds and creative thinkers in the country. But when it comes to the “number”–that magical dollar figure they figure they need to reach to retire–Wall Streeters have slightly different views than normal mortals.

“They want the number that decimates the competition,” says Ben Stein, the writer/actor/ex-lawyer who muses a lot on the foibles of Wall Street. Real players wouldn’t call it quits before they had socked away enough money to completely eclipse their friends, colleagues and neighbors. “They want shock and awe,” Stein says.

On Wall Street, no one’s number is precisely the same. The Goldman energy traders who took home a reported $100 million each last December are still at work. Meanwhile, a few managing directors who took home maybe 20% of that did decide to quit.

And of course, there’s no guarantee that once that magic number is reached, there isn’t some justification for sticking around longer and setting the bar higher. Life gets more expensive with age, after all, and expectations increase with prosperity.

Age plays a huge factor in the decision-making process. Wall Street is an up-and-out industry. Unless the goal is senior management, most people in finance are out of there by age 50. That’s not at just the biggest investment banks, either. In January, Charles Schwab Corp.‘s
Chief Financial Officer Christopher Dodds announced plans to quit in May, at age 47, to pursue greater “work-life balance.”

“I am extremely fortunate to have reached a point in my life where I now have the flexibility to be able to devote more time and attention to my family and my community,” Dodds said in a statement. (He didn’t care to elaborate for Forbes.com). “Leaving behind the daily demands of my current job provides me the time to pursue other activities, including service on corporate boards and philanthropic activities.”

An analyst at Fox-Pitt Kelton, commenting on Dodds’ announced departure, mused that he must have enough put away in stock and options, accumulated in 20 years at the company, that “it is certainly believable that he would indeed be pursuing a bona fide retirement.”

Wall Street retirees go on to all sorts of different professions or hobbies. There are plenty of stories of bankers quitting to become high school teachers or to run foundations. Many spend their golden years active on corporate boards and in philanthropy or politics.

What seems pretty common is that bankers don’t retire and spend the rest of their days working on their stamp collections. They move on to new challenges. “These guys are different,” says Alan Johnson, an executive compensation consultant who specializes in the finance industry. “They say ‘If I retire, I’ll die.’”

“It’s a run for the roses,” says Jeff Bell, an executive recruiter at Whitney Group. “Most of them resolve the issue of financial security 15 years before the rest of us.”

Bell says for many “average” Wall Street workers, $25 million in savings accumulated over the course of a career in finance is an “obtainable number,” and can usually be reached by age 45 to 50.

Let’s face it, though: That might not be enough. After all, it’s pretty tough to squeak by in Manhattan/Greenwich/East Hampton on less than $1 million a year.

To be able to retire at age 30 and maintain that $1 million-a-year-in-expenses lifestyle for the rest of your life, you’d have to have around $30 million socked away.

OK, so you want to work a few more years. You’d only need $25 million to retire at age 50 to maintain a $1-million-a-year lifestyle. A 60-year-old would need about $22 million.

Of course, one wouldn’t need nearly so much if the lifestyle were ratcheted down a bit–for example, by retiring somewhere less expensive, say New Hampshire. In that case, a 45-year-old may only need $10 million or so to confidently face retirement, says Lew Altfest, a financial planner to the rich and hedge-fundy.

“But that presupposes a person who has maintained a degree of sanity, a sense of perspective,” he says.